It is amazing that after all these year the Lone Star issue is still coming up in Korea:
An international tribunal ordered South Korea to pay the U.S. private equity firm Lone Star Funds US$216.5 million plus interest, officials said Wednesday, bringing an end to a decadelong legal battle surrounding its sell-off of a local bank.
South Korea said it cannot accept the decision and will actively consider pursuing an appeal.
The Washington, D.C.-based International Centre for Settlement of Investment Disputes (ICSID) delivered the verdict in the investor-state dispute settlement suit that Lone Star filed in 2012 to demand US$4.68 billion in compensation from South Korea’s government, according to the justice ministry.
You can read more at the link, but basically Lone Star made a bunch of much money in Korea and then tried to take its profits outside the country. Their sale of the Korea Exchange Bank led to large protests which caused the government to try and stop the sale any way it can. This all happened back in 2007 and was just one of a handful of anti-U.S. issues activists were using to stoke anti-American sentiment in Korea at the time.
Another one of these long term anti-US issues has come back up again:
Leaders of Korea Exchange Bank’s union attempt to enter the building of the Financial Services Commission (FSC) in Seoul on Nov. 18, 2011, as the FSC holds a meeting to discuss whether to order Lone Star Funds to sell most of its stake in Korea Exchange Bank. The workers are calling for the authorities to impose a punitive measure against Lone Star’s stake sale, such as ordering the fund to sell its share on the market, in a bid to prevent the buyout fund from pocketing more than twice the money it spent on purchasing KEB stocks.
Lawyers for a Democratic Society (LDS) sent a letter to the International Center for Settlement of Investment Disputes (ICSID), Tuesday, demanding a speedy settlement of the dispute between the Korean government and the U.S. buyout fund Lone Star Funds over the sale of the Korea Exchange Bank (KEB).
“The process of the legal battle worth 5 trillion won ($4.68 billion) has been shrouded in secrecy since 2012, so we requested rapid processing under the principle of transparency,” Song Ki-ho, the chairman of the international trade committee at the LDS, told the Korea Times.
The nongovernmental organization has a special consultative status with the United Nations Economic and Social Council.
In 2012, Lone Star filed a request with the ICSID, claiming the Korean government should compensate it for the “belated” approval of its sale of its KEB stake to Hana Financial and return the taxes it paid during the delay.
The global private equity firm acquired a 51.02 percent stake in KEB from a German bank in 2003, but exited Korea in 2012 after selling the stake and gaining about 4.9 trillion won in profit. (….)
Observers said the ruling will come around March this year and note the Korean government may have to pay Lone Star hundreds of billions of won in compensation. Some point out the government may claim a part of the money from Jun Kwang-woo, a former chairman of the Financial Services Commission. [Korea Times]
You can read more at the link, but basically the crime Lone Star made was that it made too much money in Korea and then tried to take its profits outside the country. Their sale of the Korea Exchange Bank led to large protests which caused the government to try and stop the sale any way it can.
The Lone Star issue continues to make headlines. This time it is about how Lone Star bribed an activist group leader to essentially shut up. So if there was any doubt, everyone now knows it is illegal to bribe activist groups in South Korea:
A local court sentenced the head of a private watchdog to two years in prison for taking bribes from Lone Star Funds in return for dropping protests over the U.S. firm’s local deal and trying to help it settle a stock manipulation trial.
The Seoul Central District Court ordered Jang Hwa-sik, the head of Spec Watch Korea, also to forfeit 800 million won (US$681,000), he received in 2011 from Yoo Hoe-won, former head of Lone Star’s local unit.
“Despite fairness and integrity expected for him as an executive of an organization whose nature is clearly of public concern, he used his position in taking the heavy amount of financial reward,” the court said.
Jang, formerly a head of the labor union at Korea Exchange Bank (KEB), had led protests against Lone Star’s profit taking in the firm’s purchase and reselling of KEB. [Yonhap]
The Korea Times has an update on the Lone Star issue which has been quiet for about three years, but is now ready to move towards arbitration:
V.V. Veeder, a British national, has been appointed as the presiding arbitrator for a 5-trillion-won international litigation between the Korean government and Lone Star Funds, sources said Tuesday.
He was one of the three arbitrators who ruled in favor of the U.S. buyout firm in 2011 in its dispute with a Korean government owned company.
According to industry sources, Veeder will arbitrate Lone Star’s Investor-State Dispute Settlement (ISDS) case against the government, whose first hearing will be held on May 15 at the International Center for Settlement of Investment Disputes in Washington D.C.
In most cases, investment tribunals are composed of three arbitrators; one is appointed by the investor, one by the state, and the third is usually chosen in agreement between the parties. The presiding arbitrator holds the casting vote when the other two fail to agree.
The Dallas-based firm filed an ISDS suit in 2012 for 5.13 trillion won ($4.7 billion), arguing that the Korean government had caused it serious financial damage by delaying its approval for the firm to sell the Korea Exchange Bank from 2007 to 2012. [Korea Times]
You can read more at the link, but basically the crime Lone Star made was that it made too much money in Korea and then tried to take its profits outside of the country. Their sale of the Korea Exchange Bank led to large protests which caused the government to try and stop the sale any way it can.
